The Employers’ Liability Act

Today we’re taking a closer look at the legislation behind employers’ liability insurance. Read on for an overview, free of the baffling legalese.


Under the 1969 Employers’ Liability (Compulsory Insurance) Act, most employers are obliged to take out employers’ liability insurance against employee illness or injury. The legislation requires employers to have at least £5 million of cover, purchased from an authorised insurer. Businesses can face a penalty up to level 4 on the standard scale of criminal penalties (currently £2,500) per day if they don’t have the right policy in place.

What employers’ liability insurance covers

First of all, what does employers’ liability insurance cover? As a quick reminder, employers’ liability insurance can cover compensation claims if an employee or ex-employee sues you for injury or damage that’s caused by their work. For example if your office worker trips over a trailing cable and injures themselves, or if a tradesman who works for you falls ill due to exposure to construction dust, your insurance can cover legal fees and compensation costs up to the limit of your policy.


The legislation sets out some types of business that are exempt, including public organisations and health service bodies, and some other organisations that are financed through public funds. Your business may also be exempt if it only employs close family members, as long as it’s not incorporated as a limited company. If your business only employs you as the owner and you also own 50% or more of the company’s shares, you’re also likely to be exempt from the legislation.

The law applies to staff who normally live and work in the UK, but if you have staff who are based abroad you should check the other country’s legislation. And if these employees spend extended periods working in the UK, they’re probably covered by the Employers’ Liability Act.  


In 2008 an amendment was made to the legislation, affecting how employers can display their employers’ liability certificates. According to the amendment, a business ‘must display one or more copies’ of the certificate at each workplace. The legislation makes it clear that the certificate can be made available in electronic form, as long as employees have ‘reasonable access’ to it. For example, you could display a hard copy of the certificate in the staff room, or save a digital version on your company’s intranet if this is accessible by all employees.  

Who counts as an ‘employee’

Although it’s clear that you need insurance if you have employees, it can be a bit more difficult to ascertain who counts as an employee. The legislation states that the term ‘employee’ refers to ‘an individual who has entered into or works under a contract of service or apprenticeship with an employer’. It clarifies that this includes both manual and clerical workers, and that the contract could be verbal rather than written. This may mean that you need employers’ liability cover even if you only use subcontractors or freelancers, especially if they use your equipment and work under your direction. If you’re not sure where you stand, it may be best to take out an employers’ liability policy just in case.

This article is intended to help you understand the legislation, but it doesn’t constitute legal advice. Only the courts can authoritatively interpret the law, and you should check the legislation for further details.

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